The Myth of Commercial Awareness

“Commercial Awareness” is one of those phrases that you hear all the time when you are applying for training contracts and never again once you start working as a trainee solicitor.

What is Commercial Awareness?

We define ‘commercial awareness’ as understanding the business environment within which law firms and their clients operate and how this commercial context influences the strategic decisions that they take.

Why is Commercial Awareness Not THAT Important?

The truth is that being a commercial lawyer actually requires very little commercial awareness for the first five years in private practice. When your training contract begins, the focus is on developing your technical skills (e.g. drafting, research, attention to detail, etc.) and professionalism (e.g., organisational ability, attitude, managing deadlines, etc.). After you qualify and gain increased exposure to clients, your interpersonal skills become more important, but commercial awareness still has fairly limited importance relative to other skills It can help to understand the wider commercial context in which you are working, but this is really just a bonus and in no way essential to performing well as a trainee.

For example, if you worked on the hostile takeover by Melrose PLC of GKN PLC as a trainee at Slaughter and May, your role would involve taking notes in key meetings, research tasks, using the Listing Rules and Takeover Code to help the associates drafting key documents and - if you’re lucky -  doing the first cut of a few ancillary documents. Commercial awareness in this context (i.e. knowing about engineering businesses, hostile takeover tactics or company valuations) might make the deal more interesting to work on and dropping a few hints to show off your knowledge could impress a little, but in reality it’s pretty far removed from actual trainee life.

Or alternatively if you were a trainee in Mischon de Reya’s real estate team supporting a transaction in 2018 for a landlord to let office space to WeWork, your tasks might include populating the data room and preparing ancillary documents such as wayleave agreements and Land Registry forms. Knowing that WeWork took 10% of all London office space in 2017, being aware of its creative approach to financial accounting and having an opinion on whether it was overvalued is interesting, but not that relevant to doing your job well and helping to complete the transaction successfully.

Commercial awareness becomes more important at senior associate/partner level. We don’t know of any partners at major commercial law firms who are not plugged into financial news. It is fundamental for them to be up to date with global events and capable of discussing  market dynamics with their clients. Sometimes this extra knowledge helps spot issues on complex transactions (e.g. we worked with a partner on a deal where the buyer was purchasing businesses in Europe and Asia and the US had recently sanctioned Turkey, which the partner raised on a client call). This is very impressive to see when done well… but let’s remember that the trainee was on the call taking a note and it was the partner scoring the points!

Notwithstanding the above, we are not saying you should be totally oblivious to current events.

Having a basic grasp of current events can help with office chat. You clearly don’t want to be the only person in the room oblivious to international trade tension or the upcoming US presidential election. But apart from obvious things like that, there are diminishing marginal returns to spending hours reading the FT / Economist if you aren’t genuinely interested. (And we know tons of commercial lawyers who love their jobs but don’t waste precious free time reading about work topics!)

Then WHY do Law Firms Say You Need to Demonstrate Commercial Awareness?

Law firms tell students they need to demonstrate commercial awareness because it (i) reflects potential and (ii) facilitates the recruitment process.

Reflects Potential

If you studied English at university and claim you want to be a banking lawyer in a Linklaters interview, the partner will want to understand your motivations. “Why did you not study law?” is a standard question you will 100% get asked here, but understanding your interests and commercial awareness will help round out the picture the interviewer needs to create to satisfy themselves that you are worthy of a job. They appreciate that at age ~19 you will only know so much about the business world and in most cases will have zero legal work experience. So while they can’t grill you on what it’s like to be a lawyer and if you’ll like it, they can try to gauge whether your interest in the profession is genuine. And what better way to do this then testing the commercial awareness you currently have! So be prepared for the interviewer to dig into your knowledge of current commercial events and, more importantly, your thoughts on such events.

Reason for Rejection

We hate to be cynical, but we have lost track of the number of times that applicants have been told they were unsuccessful at assessment centre stage because they lacked commercial awareness. Is it true in some cases? Yes. If you know nothing about M&A (what it is, how it generally works, and an example of it done recently) and claim you want to be a corporate lawyer then you’re going to run into trouble. But we often hear this cited as a reason for rejection where we don’t think it’s justified.

So why the charade? It’s a lot easier to tell someone they lack commercial awareness and they should try again next year than telling them they came across as a little thick, unprofessional, nervous, etc. And so unfortunately each application cycle you get tons of candidates preparing for their interviews by furiously reading the FT and books on commercial awareness instead of focusing on competency questions or other parts of the assessment centre.

So What Commercial Awareness Do YOU Need?

Application

You actually don’t need much commercial awareness at the application stage. Explaining why you want to practice commercial law should feature in every application but this should be tailored to your interest in commercial law rather than wider commercial awareness being required.

Unless a law firm specifically asks you to discuss a commercial event and explain why it interests you, you can park this research until later. If you do come across this question then we can help you to craft an answer that (a) focuses on an interesting topic (NB: this is harder than it seems, and many candidates make the mistake of choosing a topic that is far too complex), (b) demonstrates commercial awareness, and (c) helps your application stand out from the crowd.

Interview

Commercial awareness becomes more relevant at the interview stage. The best way to prepare with this in mind is to select one recent news story that has business and legal elements. You should then read widely about the topic in a variety of publications (e.g. compare The Guardian’s take on it to the Times and the FT) and prepare to talk convincingly about why it matters and the ramifications of the story at interview.  To be clear, selecting a purely political story (e.g. abortion debate in America) is not a good choice for discussion. A much better topic would be the Wirecard fraud as revealed by the FT.

If your interview process includes a commercial case study then it is also helpful to have a good grasp of how and where law and business intersect. If given a fact pattern you will need to draw out relevant legal questions and think laterally about how the business issues raised will affect any legal considerations.

So if you have a fact pattern that deals with buying a business that resembles Uber, you might consider raising points related to: IP issues related to the phone app, employment issues for drivers (see the recent Uber court case), insurance issues for COVID-19 safety, vicarious liability litigation for driver assaults of passengers, ability to raise financing during COVID, potential ‘add-on’ acquisitions of other similar companies (Ola, Bolt, ViaVan etc.), regulatory concerns around increased congestion charge, etc.

Conclusion

If you want to be a commercial lawyer then there’s a pretty good chance that you are interested in current events and have some base level of interest in the economy and markets. The point of this article isn’t to say you should switch that tap off; if you’re genuinely interested in broadening your commercial understanding then please do continue hoovering up the news!

Nevertheless, we think it’s dangerous to obsess over commercial awareness and many candidates overly focus on this one category in their application and interview prep. We encourage a much more holistic approach that targets competency questions as the main focus and adds commercial awareness to round out the preparation and be added into answers occasionally as a bonus to show off your wider knowledge.

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