- Hogan/Lovells
- Sonnenschein/Dentons
- Squire Sanders/Hammonds
- Proskauer/Berwins
Question: Which of these four does not resemble the others?
While you’re thinking about that…
As LegalWeek described the Hogan/Lovells deal at the time:
Aside from its banking and corporate practices, the combined firm will be strongly represented in regulatory, antitrust, intellectual property, real estate and litigation.
[Warren] Gorrell [chairman of Hogan] told Legal Week: “We are putting together a new kind of firm – not a Washington or UK-based firm but truly a different kind of firm.”“The proposition is unique – we will be able to attract new business going forward,” said [Lovells managing partner David] Harris. “We will have scale and a profile that will be much more powerful.”
The deal will see the firms keep two operational centres, one in London and the other in Washington DC – rather than opting for a single base, with a total network of 40 offices with wide coverage in the US, Europe and Asia.
The points to note about these statements, carefully crafted as they are, are that (a) no mention is made of New York; and everyone knows that the (b) the fundamental strength of the combination remains in litigation and not transactional matters.
Sonnenschein/Dentons? Again, from the trenchant analysis of LegalWeek (emphasis throughout supplied):
Even the charitable would say both Dentons and Sonnenschein have not hit their stride over the last decade, having failed to quite keep pace with their peer group. On most financial benchmarks, Dentons has been the least impressive performer in its division in recent years and, as such, the 2000 tie-up between Wilde Sapte and Denton Hall must be judged a disappointment. What was by some measures the UK’s eighth largest legal practice at the time of the union had fallen to 20th in revenue terms by 2009. And while Dentons had shrunk considerably since the 2000 deal, its profits have also substantially lagged rivals, even with this year’s 20% jump in PEP to £360,000 (average PEP for a UK top 50 law firm in 2009-10 will almost certainly be well above £500,000). The years following the deal also saw the closure of its Asia network and the break from its European network.
But perhaps the clearest indication that the UK firm has struggled to live up to its potential comes from casting your mind back to the 1990s and the reputation of the legacy Wilde Sapte. This was one of the most respected banking outfits in the City, a practice that developed names like James Johnson and Nick Syson. It was also the firm that came within a whisker of merging with Arthur Andersen in a deal that clearly unnerved the magic circle until the big five accountant walked away at the 11th hour. A credible case could be made that even merely the spectre of the Andersen/Wilde Sapte union was enough to galvanize the magic circle into the revolution that turned the group into genuinely global powers. If you accept that analysis, then Wilde Sapte has been one of the most influential practices in the UK legal market of the last 25 years, even if it failed to benefit from its own vision.
With that legacy, it seems both sad and fitting that the Wilde Sapte name should now disappear. Back in 2000 the idea that a firm of the pedigree of Denton Wilde Sapte would hook up with Sonnenschein – which remains best known in the UK for pulling the plug on its City arm a decade ago – would have seemed unthinkable, but it’s time to move on.
LegalWeek has to be kind, but its commenters do not, and while I put zero to less-than-zero stock in anonymous comments, this deal came in for some of the more vituperative criticism I’ve seen lately, among which “two drunks holding each other up” was one of the more kind. The opinions reflected in comments are not necessarily those of Adam Smith, Esq., or its management.
And, squaring the circle, this LegalWeek coverage of Squire Sanders/Hammonds:
But the greatest point of comparison is the essentially defensive nature of the tie-ups. If you were to take a 10-year view of the UK’s top 25 law firms, judged purely on the numbers, Hammonds and Dentons would be the two firms that have most struggled to deliver on their considerable promise. Indeed, it speaks volumes about the reverses that have beset Hammonds over the last decade that many now forget what a hugely potent brand the firm once was. Go back to its mid-1990s heyday and it was the then Hammond Suddards that many were betting would prove how far a regionally-bred law firm could go, not Dibb Lupton Alsop (which went on to become the DLA in DLA Piper).
The loss of that status was quick and not pretty: heavy expansion costs and a City office that struggled to gain traction strained Hammonds’ finances. Soon the firm was facing an exodus of partners, overpaid drawings and plummeting profits, a situation which culminated in the firm’s decision in 2005 to put in place a partnership lock-in to stabilise the ship.
While some were expecting such tactics would fail, it is to the great credit of the firm and in particular managing partner Peter Crossley, who was on the first wave of the clean-up crew, that the doubters were proved wrong. Over the last five years the firm has continued to play a tough hand extremely well, but there has been no escaping the feeling that Hammonds wasn’t going to regain its former vigour without doing something large and structural. Enter Squire Sanders (which had informally discussed a tie-up with Dentons before the Sonnenschein deal).
Despite having built a large US practice and a comprehensive network across the Central and Eastern European region, Squire Sanders has a few issues of its own. Its profits per equity partner for 2009 of $795,000 (£521,000) are well ahead of Hammonds’ 2009-10 figure of £364,000, but that remains well below the $1.2m (£774,000) average across the Am Law 100. The firm, which last year saw veteran chairman Thomas Stanton hand over to James Maiwurm, has explored a number of mergers over recent years without closing a significant foreign deal.
Yet if the proposed tie-up is defensive, that appears strongly in its favour. It’s an irony of strategic unions that deals done in such circumstances tend to do better than mergers between firms on a clear upward slant. Mergers often flounder because two sides believe in their own superiority and refuse to integrate, promoting an insidious wistfulness for the good old days. There’s nothing like a nice run of calamities and dead-ends to make one constructively minded, helpfully self-critical and focused on the future. Perhaps all law firms considering a merger should engineer a few disasters before hand to sharpen their resolve.
There is one interesting wrinkle that is worth noting with the deal: the 436-word statement the firms issued announcing the talks, aside from making the mandatory nods to’global coverage’, ‘shared culture’ and ‘ambitious aims’, also makes no less than four separate references to providing value or cost-effective services. As an explicit aim it should give the combined practice a little more distinction since many law firms see going global as a means of escaping domestic price pressures.
This leave us with, yes, the Proskauer/Berwin merger (talks have been confirmed on both sides, but the deal is clearly not finalized). Berwin was among the hardest-hit City firms in the downturn because of its concentration on private equity and commercial real estate, but Proskauer also has a strong private equity practice and that sector, while down, will never fundamentally be out.
So why do I nominate this as the one of the four that does not resemble the other four?
Three key reasons:
- It would put together a heavily New York-centric firm with a heavily City-centric firm, creating a footprint with 400 lawyers in each trans-Atlantic financial capital; and
- The resulting firm would have a strong corporate focus (albeit with smaller, but high-powered, litigation capabilities on both sides of the pond).
- I can’t think of a comparable offering in the marketplace.
Isn’t this, then, on a less celestial scale, the long-rumored Freshfields/Sullivan & Cromwell deal? Two very strong corporate practices, New York and London-based, offering something new in the marketplace to clients?
All I can say to you, by the way, if you’re still awaiting the Freshfields/S&C deal, or its functional equivalent, is please introduce me to your fast-forward future time machine, because I would love to experience it.
Finally, the Proskauer/Berwins deal strikes me as client-oriented rather than firm-oriented: It seems designed to create a firm with capabilities that aren’t readily replicated elsewhere among its peer group, or otherwise, and if it’s grounded in any internal sense of urgency on either side to “do a deal,” I just don’t see it. Witness the protracted period of contemplation, discussion, and, presumably, massaging the respective partnerships, both of whom are known to be strongly democratic, Quaker-meeting-ish (in the good, consensus-driven sense). Deals done of desperation aren’t paraded in front of the public for months; they are typically announced days or weeks before the obligatory partner vote, with, one can only assume, names taken of those voting against, for future reference.
The other dimension in which the Proskauer/Berwins deal does not resemble the others, of course, is that it hasn’t happened.
You now know where my money is riding on that score.
