As has been widely reported (for example, on law.com), Proskauer and SJ Berwin announced shortly before the weekend that they had called off their merger talks, which were originally disclosed over half a year ago.
The predictably anodyne statement, issued jointly, said merely:
“we recognized that the timetable necessary to reach the agreements that would ensure the successful integration of our firms is not workable at this time.”
“Our discussions began on the basis of a longstanding and profound mutual respect founded on outstanding lawyering ability, a commitment to client service, and synergistic practice capabilities,” the firms said in their statement. “Our discussions end with the same profound respect, and with the greatest admiration for all the partners we have met during the course of the process.”
The firms’ respective financials, while not really a close match, were at least within one standard deviation of each other: Berwin’s reliance on private equity and real estate meant that its PPP, having fallen 49% in its 2009 fiscal year, came back somewhat in its fiscal year ending in April 2010 with a 9% increase to $721,000, despite its revenue falling an other 7% (after a 14% drop in 2009). Meanwhile, Proskauer’s FY 2009 revenue was up 1.5% and PPP up 6.6% to $1.45-million.
Admittedly, these numbers are not “on all fours,” but as far as law firm mergers go I’ve always subscribed to the school of thought that they have to be about the long run and not about immediate propinquity from the perspective of the green eye-shade crowd.
On that score, what would a hypothetical Proskauer/SJ Berwin combo have created?
As I wrote some months ago, it would have produced a firm with 400 lawyers in New York and about the same number in London, creating an offering that currently does not exist in the marketplace: A genuine transatlantic corporate powerhouse, equally balanced between GMT and GMT-5:00.
So if this potentially made such great sense, why did it go wrong? (Disclosure: I consider myself a good friend of Proskauer, but I have zero inside information on the talks, and I was not formally involved in the deal.)
I nominate two primary culprits:
- First and foremost, as we deal lawyers know, time is the enemy of closing on any deal.
- Second and closely related, one of the primary reasons why time is the enemy is that as negotiations, due diligence, and conversations drag on, rumors tend to rush in to the fill the information vacuum.
The second reason is of course particularly acute when we’re in law-firm partnership land, especially where, as Alex Novarese put it in LegalWeek, it’s unclear what purpose the internal information blackout served once the talks were public “beyond unsettling the firm [SJ Berwin].”
Who’s hurt here, and what’s the moral of the story, if any?
Clearly, SJ Berwin has a black eye, as its talks with Proskauer followed previously fruitless talks with Orrick (query where responsibility for that might lie, but facts are facts). It now may appear to have engaged on a course of “shopping itself,” although defenses to that charge are amply available. Still, as Mark Twain famously said, an accusation can be halfway ’round the world “before truth gets its boots on.”
Proskauer seems, to me, utterly unscathed–aside from the missed opportunity, of course (yes, children, opportunity costs are real costs). Indeed, if anything, its strategic ambitions seem to have been clearly and convincingly announced to the world. Next time a major league UK firm contemplates a US merger, Proskauer’s name would have to be on anyone’s short list.
This is no small thing.
To me, Proskauer has always seemed one of the great old-line New York firms (founded in 1875), with an unparalleled tradition of public service and pro bono efforts, heavily overindexing on producing leaders of the bar and on representation of arts groups (Lincoln Center, anyone?)–but a firm that seemingly nobody had ever heard of. That can no longer be true.
And, for the record, its financial integrity is as great as ever, and it suffered no partner defections during the negotiations.
So what’s the moral of the story?
I nominate one simple candidate: If the strategic logic of a combination is strong, as I believe was true here, then hit the beach with everything you have, communicate and communicate and communicate again why this makes sense, call for immediate town-hall and roundtable meetings, go on the road to persuade your partners, do, in short, whatever it might take to persuade them of the logic of the deal: And that every day of delay is a missed opportunity.
Now (see above), I don’t know if that’s what was done here–self-evidently to no avail if so, which can always happen, of course–and this is not meant to be a post mortem on the Proskauer/Berwins deal per se, but more of a reflection on these deals in general.
But if you believe in the deal, do not be shy. Exert your every effort to get it done. And if, despite all that, it comes a cropper, at least you can come away from the table knowing there’s nothing else you could have done.
