I wrote a
few days ago about "the cautionary tale of Coudert," but with more
background emerging from Legal Week‘s excellent coverage, some
additional insight into the firm’s truly alarming predicament is possible.
Let me preface all I’m about to say by repeating that I have good friends
at the firm (albeit no inside information), and that it thus pains me
to dwell on what by any lights is now a firm in distress. But I’m
a big believer in the value of "lessons learned," and hope that some
beneficial ones might be extracted even now, before the next chapter
on Coudert is written.
Tim Newbold, the Legal Week reporter, sets the proper overall
tone when he concludes: "Coudert’s
current predicament is particularly poignant given the fact that it did
so much to blaze the [international] trail." That predicament
dates to Coudert’s expansion efforts on continental Europe in the 1990’s.
What
went wrong? Fundamentally—and we have seen this happen before—both
the profit capability, and the expectations, of its US and European practices
began to diverge, now with potentially lethal results. While the
US chafed at Europe’s lower profits dragging down the mean, Europe’s
view was that the US had reneged on promises of investment, which would
have brought them up to par. It matters not who was right; what
does matter is it went unresolved.
Now, as a strategic matter, the firm faces a difficult cross-roads. It’s
safe to say most analysts view a merger as ultimately the best, or only,
salvation for Coudert, but at the moment they’re in a defensive, underperforming
crouch: Not the stance from which to execute a merger-from-strength. If
a merger is to be more than a distress sale, Coudert needs to take the
time to restore its attractiveness—by, I would recommend, focusing
on its strong Asian network and the indispensable New York office. But
time is a luxury they may not have a lot of.
In short, they need
to merge because they’re weakened, but because they’re weakened merger
prospects are unattractive. My choice? Go for broke
(perhaps literally) and try to rebuild on your own.
As I said, there is no schadenfreude for me in this sad tale. But
there is at least one key lesson: When it comes to reconciling
different profit expectations, you cannot survive half-pregnant. Make
a choice; bite the bullet; become, perhaps, a different firm. But
a healthy one.
